Going into Business with a Friend?

“We’ve been best friends since childhood, so we know how to resolve arguments.”

“He mah bess frenn.”

These are words that strike fear and anxiety into a corporate lawyer’s heart. Granted, our perception may be slightly skewed given that we always see what happens when things go horribly wrong. Still, if you want to maintain the friendship, putting together some sort of partnership agreement is the best way to do so.

A business partnership is a lot like a marriage. Therefore, a partnership breakup is a lot like a divorce. An operating/shareholder/partnership* agreement is like a prenuptial agreement but it’s not nearly as awkward to discuss.

For so many reasons, it is imperative to put one of these owners’ agreements in place to avoid the loss of a friendship over business.

* These agreements all share the same objective – to outline the roles and responsibilities of the owners, to dictate dispute resolution, etc. They just have different terms depending on the type of entity involved. Operating agreements are used with LLCs; Shareholder agreements are used with corporations; Partnership agreements are used with, well, partnerships.

One Comment

That’s a great way to explain the operating agreement. I don’t want to lose a friend so one of our disput resolution ideas we have is to put together a 1-3 member bi-partisan board of people that just want what’s best for the business. The board will have no personal ties to the business and only interested in its success.